[stop-imf] World Bank warns of shortfall from G8 debt plans

[Robert Weissman]

Below this article, see also the Jubilee Debt Campaign and World
Development Movement (UK) joint press release on this matter.

>
> http://news.ft.com/cms/s/052e50bc-02af-11da-84e5-00000e2511c8.html
>
> *Bank warns of shortfall from G8 debt plans
> *By Alan Beattie in London
> Published: August 2 2005 05:48 | Last updated: August 2 2005 05:48
>
> The World Bank could face a multi-billion dollar financing shortfall
> unless donor governments promise more money to fund the Group of Eight
> rich countries=E2=80=99 debt relief proposal for poor nations, bank offic=
ials
> have warned.
>
> Analysis prepared by bank staff says that donors should provide fresh
> money or binding future commitments, or else spread out debt relief
> over time, to ensure that money is not simply taken from other poor
> countries supported by the bank.
>
> At its recent meetings in London and Scotland, the G8 proposed that
> the bank immediately write off 100 per cent of the debt owed by 27
> nations that have qualified for relief under the heavily indebted poor
> countries (HIPC) initiative.
>
> But the bank is concerned that the rich donor countries that finance
> the International Development Association (IDA) the bank=E2=80=99s soft-l=
oan
> and grant arm are not guaranteeing to compensate it for all the
> repayments it will no longer receive. IDA lends over periods of up to
> 40 years.
>
> A presentation prepared by Geoff Lamb, the bank=E2=80=99s vice president =
for
> concessional finance, and seen by the FT, argues that the G8=E2=80=99s cu=
rrent
> pledge to compensate the bank for the $1.4bn (1.15bn, =C2=A3790m) in
> repayments coming due in the next three years is inadequate. The =E2=80=
=9CG8
> communiqu=C3=A9 indicates [a] commitment to cover reflow losses over 3
> years=E2=80=9D, the paper says. =E2=80=9CHowever, this would not cover ID=
A=E2=80=99s true costs.=E2=80=9D
>
> Compensation for repayments over the next 10 years would cost an extra
> $6.6bn today, while compensation over the full 40-year period would
> cost an extra $24bn today equivalent to a third of all global aid last
> year.
>
> =E2=80=9CFull donor financing is key for the viability of the proposal,=
=E2=80=9D the
> bank paper warns. =E2=80=9COtherwise, IDA countries will have no benefit =
from
> the initiative.=E2=80=9D
>
> Other options suggested by bank staff involve donors making binding
> legal commitments now for extra money in the future, or spreading out
> debt relief over time by relieving payments as they come due rather
> than writing off the debt stock. But spreading out relief would
> contradict the G8=E2=80=99s promise for a clean break on debt.
>
> Officials at the UK Treasury, whose chancellor, Gordon Brown, hosted
> the G8 finance ministers this year, dismissed the concerns. They said
> the G8 had made a commitment to replenish the bank=E2=80=99s finances and=
 more
> money upfront, or spreading the relief over time, were unnecessary.
>
> But development campaigners expressed alarm. Peter Hardstaff, head of
> policy for the World Development Movement, said: =E2=80=9CThese documents=
 show
> not only that the debts won=E2=80=99t necessarily be cancelled in full
> immediately but that the G8 haven=E2=80=99t even put up the money to fund
> their own decision.=E2=80=9D
>
> He added: =E2=80=9CThere is a massive gap between the debt deal described=
 by
> Gordon Brown to campaigners marching in Edinburgh last month and the
> technical reality taking taking shape at the World Bank.=E2=80=9D
>
> The bank=E2=80=99s executive board will consider the debt relief proposal=
 this
> week in parallel with the International Monetary Fund. Small non-G8
> European countries on the IMF=E2=80=99s board have objected to the propos=
al to
> give debt relief to countries without making it conditional on
> implementing policies agreed with the fund.
>
> *****
>
> *JUBILEE DEBT CAMPAIGN *** WORLD DEVELOPMENT MOVEMENT
>
> PRESS RELEASE
> For immediate release: 2nd August 2005
>
> Leaks reveal G8 debt deal faces funding crisis
>
> *Debt campaigners today revealed leaked documents showing that far
> from granting 100 per cent debt cancellation immediately for the
> poorest countries the G8 has only promised enough money to meet the
> debt repayments of 18 developing countries for three years. The World
> Bank claims it may have to shift funding from other programmes to meet
> the G8=E2=80=99s promises.
>
> The leaks also show the World Bank is exploring the conditions under
> which debt repayments would be reimposed on a country.
>
> WDM=E2=80=99s Head of Policy Peter Hardstaff today said: =E2=80=9CThere i=
s a massive
> gap between the debt deal described by Gordon Brown to campaigners
> marching in Edinburgh last month and the technical reality taking
> shape at the World Bank.=E2=80=9D
>
> The document details options being put together by World Bank
> officials for implementation of the G8 debt deal which will be
> discussed at a meeting of World Bank Executive Directors in Washington
> today. A final proposal will be signed off by the World Bank=E2=80=99s
> Development Committee (which includes Hilary Benn) when it meets in
> September. WDM today called on the UK Government to make public all
> documents showing its position in these negotiations.
>
> The leaks raise questions about what debts are included in the
> programme and reveal that the World Bank is already planning ways to
> lend more money to those countries that get debt relief.
>
> According to the documents debt cancellation would occur through
> developing countries having their debt servicing payments met for the
> period until the loans are paid off, rather than the full value of the
> debt being cancelled immediately on completion of the qualification
> process. The documents show the World Bank considering the
> circumstances under which repayments could recommence. It focuses on a
> key phrase in the G8 Finance Ministers Communiqu=C3=A9 of 11 June (which
> was rubber stamped by the G8 leaders in Gleneagles) that indicates
> that debt payment relief will only be provided to countries that are
> =E2=80=9Con track with their programmes=E2=80=A6=E2=80=9D The World Bank =
asks: =E2=80=9CDoes this mean
> conditionality?=E2=80=9D
>
> Steven Rand, co-chair of the Jubilee Debt Campaign said: =E2=80=9CThe G8 =
debt
> deal as described by Gordon Brown fell short of our demands in several
> ways. Not enough countries were included and in order to qualify,
> countries would still be forced to open their markets, deregulate
> multinationals and privatise key services. However, it did seem to
> concede the key principle that once countries have completed the
> onerous task of getting debt relief they would have all their debts
> cancelled immediately with no chance that repayments could recommence
> under any circumstances. This now appears from these documents to be
> question.=E2=80=9D
>
> =E2=80=9CThere is a major difference between the debts being cancelled no=
w
> forever, and developing countries having their debt repayments met on
> the condition they continue to implement World Bank programmes.=E2=80=9D
>
> =E2=80=9CPut simply it is the difference between a legal agreement that y=
ou no
> longer owe the bank your mortgage and someone agreeing to write you a
> cheque for your repayments each month.=E2=80=9D
>
> Peter Hardstaff said: =E2=80=9CThe G8 are serial promise breakers and for=
 the
> past twenty years they have used the debts of the poorest countries as
> a way to impose privatisation, free trade and deregulation on
> developing countries. Unless these debts are irreversibly lifted from
> developing countries we have no faith that rich countries will not use
> international institutions to impose damaging free market conditions
> in the future.=E2=80=9D
>
> According to the World Bank the G8 has committed only to finance the
> first three years of the proposal: =E2=80=9Cfull donor financing is key f=
or
> viability of the proposal.=E2=80=9D
>
> Peter Hardstaff said: =E2=80=9CThese documents show not only that the deb=
ts
> won=E2=80=99t necessarily be immediately cancelled in full, but that the =
G8
> haven=E2=80=99t even put up the money to fund their own decision. There i=
s no
> firm commitment by the G8 to continue to meet the cost of the
> repayment for the rest of the life of the loans. They may have to
> divert money from other parts of the World Bank to meet their promises.=
=E2=80=9D
>
> The document come less than two weeks after the leaking of IMF
> documents to debt campaigners that showed some European
> representatives at the IMF are suggesting major modifications to the
> G8 debt deal. These could delay or even halt the debt cancellation
> promised to 18 countries by the G8 and maintain an IMF stranglehold
> over developing country economies even after they qualify for debt
> cancellation.
> ENDS
>
> /Notes for editors
> /The leaked document can be found at:
> www.wdm.org.uk/worldbankleaks.doc
> <http://www.wdm.org.uk/worldbankleaks.doc>
>
> Speaking at a Unicef conference on 29 June Gordon Brown said:
> =E2=80=9CTogether and for years we have fought for debt relief - and this=
 year
> we are finally delivering =E2=80=93100 per cent relief to the poorest
> countries in the world: a $55 billion write off of multilateral debt,
> $40 billion immediately
>
> And to a Christian Aid audience 2 July: "I can tell you now that we
> have already decided that in this year, 2005, 18 of the poorest
> countries of the world - then 28 and then 38 - will for the first time
> have 100% of their debts written off: $40bn of debt written off
> immediately.=E2=80=9D
> "One hundred percent debt cancellation: proof that we are not
> powerless but that working together we have power to change the world.=E2=
=80=9D
>
> *Contacts
> *Dave Timms, Press Officer, World Development Movement =E2=80=93 07711 87=
5 345
> Stephen Rand, co chair, Jubilee Debt Campaign - 07889 158 215